02/08/2012 (Bernama) - The Ministry of Plantation Industry and Commodities on Wednesday clarified that the increase in shipping quota for tax-free crude palm oil (CPO) is only a temporary measure aimed at stock management and ensuring remunerative prices for producers.

It said the ministry would continue to discuss with all relevant stakeholders on how to address the industry's competitiveness in the longer-term.

"This is to ensure a balanced growth and the interest of all players in the industry is taken into account," the ministry said in a statement.

An English daily, quoting Reuters, reported recently that Malaysia had increased the export quota by an additional two million tonnes, bringing the total quota to five million tonnes this year, in a move to address falling market share.

The reduced share was brought about by the Indonesian export tax structure on palm oil products and as a stock management tool.

The ministry said the palm oil downstream sector in particular, producers of processed palm oil and packed products, had made numerous representations regarding the competitiveness of these products, versus those produced in Indonesia since September 2011.

"This was contributed by the export tax structure in Indonesia which is aimed at promoting downstream operations.

"In view of this, domestic refining capacity utilisation has decreased to 60.8 per cent for the period January to June compared with 72.9 per cent for the same period in 2011.

"The Ministry is concerned that due to the additional time required to address this issue, the additional window to reduce stocks through the CPO duty free mechanism has to be maintained," the statement added.

Production is forecast at 18.5 million tonnes and the CPO duty free quota of five million tonnes accounted for 27 per cent of total domestic CPO production.

Between January and June, monthly average palm oil stock stood at 1.895 million tonnes against 1.693 million tonnes registered in the corresponding period last year.

In addition, CPO production in the second half was projected to increase three per cent to 10.621 million tonnes against 10.318 million tonnes recorded in the same period last year.

The ministry also said it was currently undertaking a comprehensive review to further enhance the downstream sector of the palm oil industry.